Shares & Derivatives
Pitfalls of relying only on P/E ratios
By Investmoolah  •  December 18, 2016
P/E (price earnings ratio) is a measure often used and cited for stock analysis. Commentators will often appeal to the masses by quoting lines of: "Buy this stock now! It is selling at such a low P/E ratio"  But is it a reliable measure? Let's use the complete past 3 year financial results (excluding one-offs) of Ezion Holdings and Penguin and the share price these companies were selling for slightly after the announcement of their full year financial results on the SGX. 
FY end     Ezion EPS Share price (start Mar) P/E ratio
2013 16.06 163.5 10.2
2014 16.53 97.6 5.9
2015 2.33 62.5 26.8
 
FY end   Penguin EPS Share price (start Mar) P/E ratio
2013 2.49 15.2 6.10
2014 4.56 21.5 4.71
2015 1.41 13 9.29
 *All figures above are ...
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By Investmoolah
A total otaku who loves anime, investing and the occasional K-drama. My financial journey begun at the age of 22 and has revolved around the concepts of "Working Hard", "Saving Well" and "Investing Wisely". Through my journey, I have realized that financial literacy is something we have learnt little during our school days but is one of the most useful and relevant skill that we have to be equipped to take on the real world. Concepts such as compounding and "common sense investing" are skills that will place us ahead of the race to retirement ...
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